The US government has asked JPMorgan, PNC and several other financial groups, including non-bank investment firms, to bid for all or part of First Republic, as US regulators try to determine how much it would cost to take over the troubled Californian lender. writes the British publication Financial Times, quoted by Ziarul Financiar.
The offers must be submitted by Sunday afternoon, in a measure that, the authorities hope, will calm the markets and end a period of uncertainty for regional lenders, notes CNBC.
In the past 24 hours, it has become clear to both First Republic and the government that stabilizing the bank will almost certainly require its takeover by the Federal Deposit Insurance Corporation, four people briefed on the situation said.
First Republic shares have lost more than 97 percent of their value this year, dragged down by concerns about paper losses on its mortgage portfolio and other assets, as well as massive deposit outflows after the March 10 collapse of the Silicon Valley Bank.
US news agency Bloomberg notes that the regulator reached out to some banks late Thursday seeking indications of interest, including a proposed price and estimated cost for the agency’s deposit insurance fund. Based on the proposals received on Friday, the regulatory authority invited some of these companies and others to the next stage of the bidding process.
The auction process launched by regulators – after weeks of unsuccessful talks between the banks and their advisers – could pave the way for a more orderly sale of First Republic than the protracted auctions that followed the failures of Silicon Valley Bank and Signature Bank last month. The drop in shares – leaving the company with a market value of $650 million – made such a takeover at least somewhat more feasible.
Potential bidders were given digital access to a data room with extensive information about First Republic’s loans and other assets, according to two sources familiar with the process. A number of investment firms were also given access to the data and encouraged to submit offers, the FT writes.
Banks and others have been told that bids that would include taking First Republic into receivership are welcome, and that a winning bid would likely include some assistance from the FDIC’s insurance fund. Bidders were given until Sunday to submit firm offers.
Guggenheim is advising the FDIC on the suit, according to people familiar with the matter.
JPMorgan, which led an earlier effort to stabilize First Republic by convening a group of 11 banks to place $30 billion in deposits with the lender, is currently preparing an offer for a post-resolution transaction, three people familiar with the matter said. about the situation. JPMorgan and PNC declined to comment.
It is unclear how many other banks will submit bids or whether the FDIC will consider any of the bids acceptable. When SVB went bankrupt, other lenders initially refused to bid, and the FDIC set up a bridge bank to give its customers access to their money.
The FDIC said: “We cannot comment or confirm reports that we are bidding for an open and operational bank.”
If San Francisco-based First Republic is taken over by the FDIC, it will rank among the largest bank failures in US history, along with Washington Mutual in 2008 and SVB.
First Republic’s business model, which consists of using low-cost deposits to finance cheap mortgages, has been under pressure from rising interest rates. It revealed on Monday that customers had withdrawn more than $100 billion in deposits as concerns about regional banks grew following the collapse of SVB.
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